Cyber liability insurance is still a relatively new insurance product. Many companies remain confused about whether they really need this coverage. To many, it sounds like the type of insurance only high-tech companies need.
In reality, companies of every shape and size need cybersecurity insurance, even if they don’t offer a product or service that has anything to do with technology.
Cyber Data Breaches Are Costly on Multiple Levels
The examples of Walmart and Target are common enough, but there are other examples of smaller operations that have faced significant liabilities.
For example, in Philadelphia, a small chain of sandwich shops called PrimoHoagies failed to detect a data breach that took place over the course of seven months. The plaintiff is seeking compensatory and punitive damages that are currently “unspecified.”
Yet if a $5 million suit faced by a Cincinnati freight brokerage company is any guide, it may well be more money than a sandwich company could absorb without insurance companies. Even small medical practices have felt the sting of these cybersecurity suits.
Companies who fail to protect their customers from data breaches can expect to face both personal injury and class action suits.
Lawsuits aren’t the only expense a company has to worry about without cyber insurance. They also will have to cover the costs of repairing damaged software or hardware, replacing funds stolen by hackers, and covering the cost of business interruption caused by data breaches that suspend operation. As customers tend to be either unforgiving of or frightened by the thought of doing business with organizations that have suffered from a data breach, there will be costs associated with repairing the reputation of the business as well.
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